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Merck Expects Robust Revenue Performance in Fiscal 2019

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Performance in fiscal 2018

In fiscal 2018, Merck (MRK) reported revenues of $42.29 billion, a YoY rise of 5%. The company’s Pharmaceutical business reported revenues of $37.69 billion, a YoY rise of 6% driven by robust demand for the company’s key brands such as Keytruda, Gardasil, and Bridion. The Animal Health business reported revenues of $4.21 billion, a YoY rise of 9% driven by robust demand for companion animal products as well as livestock products.

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In the fourth quarter of 2018, Merck reported revenues of $11.0 billion, a YoY rise of 5.5%. The figure was higher than the consensus revenue estimate by $50 million. The Pharmaceuticals business reported revenues of $9.83 billion, a YoY rise of 6%, while the Animal Health business reported revenues of $1.04 billion, a YoY rise of 6%.

Performance in fiscal 2019

Analysts expect Merck’s revenues to rise 3.91% YoY to $10.43 billion in the first quarter, 5.43% YoY to $44.59 billion in fiscal 2019, 5.67% YoY to $47.12 billion in fiscal 2020, and 5.12% YoY to $49.53 billion in fiscal 2021.

In its fourth-quarter conference call, Merck has guided revenues of $43.2 billion to $44.7 billion for fiscal 2019, a YoY increase of 2% to 6% on a reported basis and 3% to 7% excluding the impact of foreign exchange fluctuations. According to the company’s fourth-quarter conference call, the revenues are expected to be driven by strong demand for Merck’s oncology, hospital and specialty, vaccines, and animal health products.

Gross margin projections

In fiscal 2018, Merck reported a gross margin of 68.1%, a YoY rise of 30 basis points. The company expects to report a flat margin performance in fiscal 2019. According to the company’s fourth-quarter conference call, the positive impact of a favorable product mix is expected to be offset by headwinds such as increasing royalty payments, unfavorable foreign currency fluctuations, high drug pricing pressures, and ongoing amortization of collaboration milestones.

Next, we’ll look at the EPS growth trajectory of Merck in fiscal 2018.

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